With the virtual disappearance of traditional company sponsored pension plans, the majority of the current workforce realizes that they are largely responsible for planning their own retirement income. In light of this fact, retirement investment plans, and investment plans in general, are enjoying all time high participation levels in the United States. In addition, many people of all ages now regularly project, and often diligently plan out, their financial futures and expectations over shorter periods of time in much the same way that they plan out their retirement funding, i.e., using short and medium term financial predictions, investments and strategies, and by setting up accounts/assets dedicated to funding expected expenses and/or purchases.
Few would argue that planning and investing with an eye to the future, including retirement, is anything but intelligent, prudent and necessary. However, many currently available investment systems, mechanisms, plans and/or strategies often fail to carefully and accurately project healthcare costs over the investment period and/or the period of investment revenue reliance. The result of this current situation is that many well meaning, and well disciplined, investors discover that their carefully planned and cultivated investment revenue models collapse under seemingly endlessly rising “out-of-pocket”healthcare costs. Indeed current estimates of the out-of-pocket healthcare costs an average person will incur between age 65 and death are in the $300,000.00 to $500,000.00 range.
Inadequately planned for healthcare expenses can undermine investment and financial plans and strategies for any period of time, and for any investor of any age. However, the situation is particularly problematic when the investment planning is designed to include the retirement years and is meant to assure retirement income. This is true for several reasons including, but not limited to: the general deterioration of the body with age and the corresponding increase in medical procedures and medication use, which leads to a corresponding increase in individual healthcare costs and the necessity of the treatments/services causing the cost; the inability to recover from inadequate planning, i.e., typically a fixed income, at best; the lack of employer sponsored health insurance after retirement; and/or the inability to secure insurance at an older age and/or in a generally poorer state of health.
As a result of the situation described above, many investors who carefully and responsibly plan out their short term, medium term, and long term financial futures are currently basing their calculations on inaccurate/incomplete data. This often is a self-defeating exercise that, for many investors, will result in disappointment and disillusionment, at best, and, in many cases, in financial disaster.